Macau building non-gambling sector

Six Macau casinos will invest $15bn predominantly towards non-gambling activities over the next ten years as part of their new license agreements.

part of the new license agreements the casinos signed last month

The non-gaming expenditure will be more than ten times as high as gaming-related expenses. The rule comes as part of the new license agreements the casinos signed last month with a region regarded as the most lavish gambling destination in the world.

The signing of the agreement ends a period of tension between casinos and interested figures including investors, regulators, and casino owners. The properties will now spend the next decade pursuing outward growth rather than investing purely in gaming offerings.

Signing the agreements

Macau Chief Executive Ho lat Seng, Secretary of Economy and Finance Lionel Leong Leong Vai Tac, and other officials presided over the signing of the agreements. Incumbents Wynn, MGM, Sands China, Galaxy Entertainment, Melco Resorts, and MJM Holdings were all present after successfully?fending off a surprise bid from Malaysia-based Genting Group.

Heads of each company sat next to government officials as the deals were signed. Each deal will be enacted on January 1, 2023, paving a clear route into the future.

The focal point of the new agreements involves finding ways to attract more foreign tourists. This is reflective of the wishes of the Chinese government, which feels that the region needs to become more than just a hub for rich travelers who happen to be in the area. 

investment towards non-gaming interests is expected to hit $13.57bn

The total investment towards non-gaming interests is expected to hit $13.57bn, compared to just $1.26bn for pure gaming development. The new plan is a clear pivot from the strategy of the past and is being done after the pandemic caused casinos to lose billions of dollars during inoperative periods and the following recovery.

“The development of Macau’s gaming and tourism industry will enter a new stage,” an official announcement from the region stated.

Follow the money

Macau, a southeastern region near the bottom of mainland China, has been a global leader in gambling and other high roller activities for decades. Macau also has gambling in its DNA as the Portuguese who formerly claimed the area legalized and implemented legislation taxing gambling revenues in 1847.

impossible for casinos to survive without any ill effects.

China’s stringent COVID policies, however, have made it impossible for casinos to survive without any ill effects. Travel restrictions, frequent lockdowns, and capacity limitations have all been felt throughout the area as part of a “zero-COVID” policy aimed at completely eradicating the virus from the region to the detriment—and peril—of local businesses.

The Chinese government has also become increasingly interested in?snuffing out illegal operations in the area?that helped attract different high rollers, further prompting the need for Macau to diversify its income flow. As it stands, over 80% of the region’s cash flow comes from gambling and related activities.

The companies will pool money to invest in areas such as conference hosting and medicine. They will also need to stabilize local employment and will face greater government oversight than they have in the past.

“These projects will bring new players and tourists into the city, who in turn will spend sizable dollars on gambling,” said J.P. Morgan Hong Kong analyst DS Kim.